Dedicated Followers of Fintech: Why Transaction Banking Never Goes Out of Fashion
Taking part in a panel at a recent corporate treasury conference, I was introduced as a ‘consumer payments expert’ – not an obvious qualification for sharing stage-time with serious corporate liquidity and cash management folk, but as the talk track was on mobile wallets and Open Banking, I had some reasonably safe and relevant content on which to fall back.
One of my fellow speakers was the immaculately dressed treasurer from fashion house Chanel, who brought fascinating insights on the spending demands of very high-value consumers from around the world. It reminded of that age-old separation between high value (commercial) and low value (retail) payments operations.
Perhaps it is the highly mobile global consumers of luxury brands who are now helping to accelerate a convergence between commercial and retail payments, and exposing more banks to the acceptance of – once exotic – alternative payment methods.
Although the average conference attendee was not as well labelled as my elegant fashion house colleague, I was struck by how most of the (predominantly male) attendees were still so well acquainted with suits and ties. Uncharacteristically, I had anticipated and planned for some dress-code ambiguity, so I could mingle without too many raised eyebrows, wearing what I’d like to think would be described as ‘post-Fintech-2020-Actionwear,’ or what others might have simply called ‘suit and tie.’
Dress code dissonance was, however, a minor sensation compared to the wider realization that my ‘safe and relevant’ on-stage topics may not have been as well understood as I’d assumed. Attendees were certainly very polite and curious about the applicability of new concepts into the world of treasury, but it didn’t feel that Open Banking, alternative payments and APIs were commonplace in a typical treasurer’s closet.
Retail banking doesn’t own the catwalk
I started to wonder, perhaps a little unfairly, whether the buttoned-up behavior was reflective of an industry a bit reluctant to embrace changing payments fashions. And I started to question recent data that showed strong demand from corporates for improved liquidity, better credit decisions, aggregation of multi-banks accounts, visibility of real-time payment information and so on.
In conversations at the conference, most delegates were keen on the logic of new digital banking services and the benefits of real-time payments, but it still felt like there was an inertia and an assumption that change might not happen so quickly. I wondered about the possible reasons for this stasis at the point of interaction between corporates and their banks. Is there a rationale for retail banking moving very quickly to digital applications, online statements and mobile payments, whilst treasury still seems to prefer a world of paper and spreadsheets?
I realized I was being unfair. The apparently conservative uniform of treasury has little correlation with the changing complexity of corporate life. And I’m not comfortable with a view that characterizes retail banking alone as the innovative driver for digital change: A truer picture needs to show the nuanced reality of two intertwined markets, with transaction banking and retail payments requiring a shared, powerful engine room to power through the services demanded by modern treasurers.
Perhaps too many of us have assumed that the action has all been in the retail banking world. I suspect if we looked deeper into the raw numbers for adoption and transaction volumes, we may find that digital-only retail banking is still a minority sport. It may be changing at a fast pace, but for every bright pink Monzo account, there’s an awful lot of customers in the UK still clinging to their chequebook. And for all the availability of new payments infrastructure like faster payments, we haven’t exactly seen a seismic shift of consumer behaviour away from the default patterns of cards, toward inexpensive, direct-from-account push payments.
The pace of change in commercial banking appears to be even more glacial, but this superficial view overlooks the complexities of modern trade. The innovative trend-setters are looking to improve cash flow and access to credit, and to improve efficiency and profitable growth across wide and long supply chains.
Treasurers are clued up on public policy initiatives that aim to unlock capital and liquidity within global payment systems. However, businesses can be excused for prioritizing their own internal infrastructural efficiencies before turning toward potential collaborative efforts with their banking partners, and exploring new concepts like Open Banking and real-time consumer payments.
Although these trends may appear superficial, it is time to consider their serious impact on the changing fashions of banking. Ten years after the financial services disaster, it is time for banks to accelerate the rate of change and to make possibilities happen – particularly in the corporate sector.
Sure, there is still a need to help move consumer markets toward lower-cost real-time concepts, but the big prize for banks cannot be limited to a vision of new retail banking fees. A bigger prize lies in helping businesses to get closer to their markets, sharing in the improved performance of these companies, and helping businesses to interact with wider mass markets (including consumers) where real-time payments have become the norm.
This requires extra effort at the bank-corporate interface, and not inconsiderable change. And unfortunately, the concepts are not quite as snazzily understandable as retail products, such as mobile apps and wallets. But that makes the prize for successful corporate bankers even more desirable, because mastering the complexity whilst being able to curate uniquely customized solutions for businesses will give them a competitive silhouette, which is not only noticeable but memorable too.
Time for banks to embrace new fashions
Back at the conference, my Chanel colleague showed a lovely video about the concept of “Baudruchage” (it’s always great to come back from conferences with at least one extra bit of vocabulary). It’s the process used to seal perfume bottles, which still requires manual effort, wax and string. It’s probably not the most efficient way to guarantee quality, tamper-proof authenticity, but in a world of ever important ‘personalization,’ it’s a vital part of Chanel’s overall brand, service and product.
As Coco Chanel once said, “in order to be irreplaceable, one must be different.” She may have been referring to clothing, but her sentiments resonate with today’s need for banks to embrace the new real-time fashions and to support new customized services.
It’s time for more corporate banks to gear up for the banking equivalent of this modern service curation, helping more businesses to make their own possibilities happen. It’s also time for more treasurers to loosen those ties, roll-up those sleeves and ask more of their banking suppliers – financial services that span corporate and retail payments.
Change and unpredictability are fashionable aspects of payments, but it’s important that the basics of quality, reliability and availability are retained as the foundations for the new style of corporate banking, doing justice to the famous Yves Saint Laurent quote: “Fashions fade, style is eternal.”
The pan-European scheme question is not just about a new payment type, but about a new business environment. That environment is increasingly global for both the bank and its customers. When considering any real-time payments decision, banks must be confident that every step along that journey is with long-term strategy in mind; any pan-European implementation must easily scale to expanding volumes and integrate with global cross-border payments schemes, providing the quality and reach of service that customers expect.
Related Blog Posts
Payments and Fraud: The Paradox Twins
Digital commerce through web and mobile is where merchants predominantly experience shopper growth today. This has become a hugely important domain for their focus. It offers a means for international growth, new market penetration and a way to engage with shopper-hungry Millennials in their culture. Merchants frequently adopt a Digital-First, eCommerce-First or Mobile-First strategy to ensure full corporate buy-in to this strategy.
Open Payments Systems for Merchants: Don't Close Down Your Options
Remember “Open Systems”?
It was a big industry nom du jour in the 80s and 90s. Every IT system had to be open and therefore flexible and future-proof. Nobody can argue with the logic behind this; making systems easy to integrate with other systems, ensuring vendors could cooperate with one another; creating agility to improve time to market and drive down costs.
Why It’s Time for Women to Rise UP
As a senior software engineer at ACI Worldwide, Rawan Shawar helps to guide her team’s priorities and enhance processes at both the team and organizational level. Recently, Rawan was selected by the organizers of Money20/20 Asia to be part the Rise Up Class of 2019.
Can Digital Payments Be Kind?
There is no doubt that the era of less (or minimal) cash is truly upon us. According to the Access to Cash Review, cash could fall to just 10 percent of all payments in the UK within the next 15 years.
Other countries, such as Sweden, have already seen significant changes – cashless payments have grown so quickly that only 10 percent of the 20 SEB banks in Stockholm now hold cash. Beyond Europe, China is leading the way with USD$12.8 trillion in mobile payment transactions in 2018.
Keeping Up With Fraudsters: A Month Isn’t Enough
As the Government of Canada campaigns for improved fraud prevention and awareness this month, I’d like to do my part as a fellow Canadian, and shed some light on why payments need to stay a step (or more) ahead of fraudsters, today more than ever.
Local Perspectives: Real-Time Realities Across Asia-Pacific in 2019
Money20/20 Asia returns to Singapore this week, attracting payments professionals from around the vast APAC region – and beyond. The real-time and open imperative is one of the reasons why all eyes are on Asia-Pacific when it comes to payments, so I caught up with ACI payments experts representing three of the key countries within the region, to take the pulse of real-time schemes that are in varying stages of maturity.
What it Takes to be an ‘Influential Woman in Payments’ [Q&A]
Coming off the back of International Women’s Day this past weekend, PaymentsSource has recognized the Most Influential Women in Payments, spanning multiple industries including financial services, retail, investment and technology. Among the honorees is ACI’s very own Carolyn Homberger, group president, global sales. Part of the executive leadership team at ACI, Carolyn leads a team of payments professionals operating across all global regions, and plays a critical role in setting business strategy. As an advocate for the leadership and growth of women in the payments industry, Carolyn is also responsible for launching ACI’s own Women’s Initiative.
What We Talk About When We Talk About Digital Transformation
The recent headline grabbing announcement that Banco Santander has signed a USD $700M contract with IBM got me thinking… what’s up with ‘Digital Transformation’ these days? Santander’s announcement was all about digital transformation… and they are a forward-thinking bank. The new global technology agreement is designed to increase efficiencies in the bank’s operations, enable it to be more innovative and deliver new products, faster. But not every bank can pony up $700M and not every bank has suitable technology in place. It got me thinking, what is actually needed for digital transformation?
Putting Malaysia on the Path to Payments Innovation
The public launch of the DuitNow instant credit transfer service, in December 2018, provides just a taste of what lies ahead as Malaysia’s Real-time Retail Payments Platform (RPP) is progressively rolled out. Fueled by Bank Negara’s (BNM) increasing support for e-payment platform development, there has been a steady increase in mobile wallet and digital payment usage, setting the stage for 2019 to be a year of transformation for the payments industry in Malaysia.
What Can the Re-Regulation of Other Industries Tell Us About Open Banking One Year On?
UK Open Banking just reached its first birthday milestone (on January 13 to be precise) and given my own commentary – including in the ACI blog – on this topic, the first anniversary of Open Banking in the UK certainly won’t pass without a debrief on the progress that’s been made and what challenges lie ahead.